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Cablegate: Approval of Sno License - an Empty Gesture?

This record is a partial extract of the original cable. The full text of the original cable is not available.

UNCLAS PRETORIA 004312

SIPDIS

DEPT FOR AF/EPS DKRZYWDA AND AF/S/TCRAIG
COMMERCE FOR 4510/ITA/IEP/ANESA/OA/JDIEMOND
TREASURY FOR GCHRISTOPULOS, LSTURM, AND AJEWEL
DEPT PASS USTR FOR PCOLEMAN AND WJACKSON

SENSITIVE

E.O. 12958: N/A
TAGS: EINV ETRD EFIN ECIN ECON SF
SUBJECT: APPROVAL OF SNO LICENSE - AN EMPTY GESTURE?

REFTEL: A) PRETORIA 3943
B) PRETORIA 6384

(U) This cable is sensitive but unclassified. Not for
Internet distribution.

1. (SBU) SUMMARY. Minister of Communications Ivy Matsepe-
Casaburri conditionally approved a license for the Second
National Operator (SNO) on September 17. The Independent
Communications Authority of South Africa (ICASA) must now
oversee negotiations to issue the license despite the lack of
a shareholding agreement, business plan, and shareholders and
subscription agreements. While some SNO shareholders are
optimistic about the announcement, Nexus (the SNO's
empowerment shareholder) argues that nothing has really
changed and is proceeding with its call for a judicial review
of the SNO process. END SUMMARY.

2. (U) As promised in her August 27 press conference, the
Minister of Communication Ivy Matsepe-Casaburri approved a
license for the Second National Operator (SNO) on September
17. Casaburri said the approval was subject to the following
conditions: a) acceptance of the shareholding and control
structure of the SNO; b) finalization of and agreement on the
Business Plan; and c) finalization of the Shareholders and
Subscription Agreements. The Minister has asked the
Independent Communications Authority of South Africa (ICASA)
to undertake the role of approving the applicants'
submissions, including the shareholders agreement, business
plan, and then the licensing of the SNO entity. (NOTE: While
South African law allows the Minister to approve a license,
only the regulator can issue the license. END NOTE).

3. (U) The Minister's August 27 announcement detailed
changes to the shareholding structure and was also subject to
the same conditions outlined in paragraph 2. Although all
the SNO shareholders have yet to accept the Minister's
proposed shareholding structure, she approved the license
anyway. Industry stakeholders said that the Minister's
approval of a license effectively places the burden of the
SNO squarely on the shoulders of the regulator without
actually resolving anything.

4. (SBU) A Nexus (the empowerment partner in the SNO)
official told Econoff that since the Minister has yet to find
a 26 percent shareholder for the strategic equity partner
(SepCo) stake, nothing has really changed. According to the
official, ComuniTel and TwoConsortium, the two failed bidders
from the tender process who were awarded a combined 25
percent stake in SepCo, still remain in a position to control
the SNO. As a result, Nexus has renewed its call for a
judicial review of the SNO process. This process could
derail the SNO for months.

5. (U) Nevertheless, some SNO stakeholders remain
optimistic. Karl Socikwa Transtel CEO and SNO official
spokesperson said he is "cautiously optimistic" that the the
Minister's announcement would make the SNO network available
by early next year, in time to capitalize on the opening of
the services market in February. Deputy Minister of
Communications Roy Padayachee also claims to have
confirmation that Nexus will drop its legal action and that
the SNO parties are moving forward. To date there has been
no public comment on the Minister's proposed shareholding
structure or her approval of the SNO license.

6. (U) Meanwhile, industry stakeholders are anxiously
awaiting the Minister's October press conference where she
has said she will elaborate on the telecom liberalizations to
take place February 1, 2005.

FRAZER

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